Whether it’s because there wasn’t time to complete the required contract or because you took someone at their word, verbal contracts have a habit of sneaking into our business lives.
In many cases, verbal contracts are a sufficient foundation on which to build strong, long-lasting relationships. However, issues can arise where one party disputes the agreed terms of the contract, or that there was ever a contract at all.
In these instances, the question that immediately comes to mind is: was the contract legally binding in the first place? Don’t worry — you’re not the first person to ask this question and certainly won’t be the last.
Does a Verbal Contract Hold Up in Court?
As a general rule, the law in the UK considers verbal contracts to be as legally binding as written ones, and therefore they do hold up in court. However, where you may encounter difficulty is proving the terms of the contract, for which you’ll need to provide evidence to the court.
By far and away the most cost-effective way to resolve a dispute around a contract is for both parties to come to a new agreement outside of the courts. In the event you are not able to resolve the dispute yourself, the validity and terms of the contract will be determined by a judge using a common-sense approach.
So, if you’ve incurred a loss because a verbal contract was breached, you do have legal recourse to recover damages. However, gathering the evidence to prove the terms of your contract is likely to be more complex and time-consuming compared to a written agreement.
Therefore, if you are considering or in the process of pursuing or defending a dispute over a verbal contract, you should seek professional legal help to improve your chances of success.
What Makes A Contract?
Before a dispute over a verbal contract is launched, you should take a moment to confirm you actually entered into a contract. The difficulty with verbal agreements is that it is possible for two parties to be on different pages.
You may think an agreement was reached, while the other party may have only meant it was an option for the future.
Whatever the case, it’s worth double-checking a contact was actually formed, for which four elements need to be present:
- An offer: One of the parties needs to have promised to enter into a contract on the basis of set terms that are specific, complete and capable of being accepted.
- An acceptance of that offer: Acceptance must be made unequivocally, meaning the contract is not subject to further negotiations.
- Consideration: The contact must include an exchange of some value, such as services for payment.
- The intent to create legal relations: Both parties must intend to enter into a legally binding contract. For business agreements, the general assumption is that the parties intend to enter into a legal contract.
Proving a Verbal Contract
While a verbal contract may seem obvious to you, you still need to be able to prove it in a court for it to hold up. This is where evidence gathering becomes so important.
Since you don’t have a written contract, you’ll need to look for three core types of evidence:
One of the best ways to demonstrate the terms of the verbal contract is by identifying witnesses to any conversations you had and receiving a written statement from them. In these cases, the more independent the witness the better.
If an employee dealt with any part of the deal, from taking the order over the phone to delivering goods, when payment was verbally agreed, you should also get a witness statement from them.
Even if you can’t source an independent witness, don’t forget that you yourself can — and should — provide a witness statement.
While you may not have a written contract, it’s perfectly possible you have other written documentation that demonstrates the terms of the contract and that it was entered into willingly.
This type of evidence could include:
- Emails and text messages referring to the agreement that was made;
- Notes made at the time of reaching the agreement;
- Bank statements showing payments were made;
- Invoices demonstrating the unpaid debt the dispute is based on;
Another common form of evidence you can use is the actions of the breaching party. For example, earlier payments they have made to you may go a long way to demonstrating a verbal contract had been entered into. Likewise, if they used your services or products.
While we’re on actions, it’s a good idea to keep a concise record of your dealings with the other party since the dispute arose. The courts want as many disputes as possible to be resolved without them, so while there is no guarantee it will have an impact on the final outcome, the conduct of the breaching party could come into play.
For example, if you’ve tried repeatedly to contact them and reach a resolution and they have refused to engage, this may be information you want to present to the court.
Furthermore, keeping a diary of your engagement will help your solicitor get up to speed quickly if and when you instruct them.
Resolving Verbal Contract Disputes
A verbal contract will certainly hold up in court if you have the required evidence to prove it existed in the first place. However, before you begin preparing for your day in court, you should take all reasonable steps to resolve the dispute without litigation.
This is important for a couple of reasons. Firstly, courts want to see an effort to resolve disagreements without them. Secondly, an alternative dispute resolution (ADR), such as mediation, is typically far more cost-effective than litigation.
Therefore, before you ask whether your verbal contract will hold up in court, ask yourself whether you can resolve the dispute through alternative means.
Regardless of whether you think your dispute will end up in court, your first step in proving a verbal contract should be to speak to a solicitor.
Unlike written contracts, verbal agreements are far more complex to provide evidence for, so it’s a good idea to obtain an expert opinion.
If you’re considering engaging in a dispute based on a verbal contract, get in touch today to learn how we can help you.